Wednesday, 27 February 2013

Ernskine Bowles and Sequestration

On Monday night, Ernskine Bowles spoke to a packed crowd at the Kimmel Center in Philadelphia. He vividly highlighted the long-term danger of a growing national debt, as well as broadly outlined the Simpson-Bowles plan. However quaint his sweeping generalizations seemed, his prescriptions hardly withstood even the most perfunctory stress test—both from a political and economic point of view.

Simpson-Bowles marks another failure in an attempt to contain an economy that could eventually loose its traction. Which brings us to the sequester. Because an agreement couldn't be reached, we're now facing indiscriminate cuts in government spending. And if you think government spending are two words that should never be juxtaposed, consider the distinction between government consumption and government investment.

The sequester means a slashing of R&D, a crucial element to future socioeconomic growth. It is a cut in investment that private enterprise will not offset. The ITIF has asserted that the sequester will mean an 8.7% cut in R&D in 2013 alone, stating that "reducing the budget deficit is important, but it should not and does not have to come at the expense of growth-inducing investments in areas like federal support for R&D. In fact, undermining growth capability is disruptive of a deficit control policy."

Sequestration also has unsavory implications for education. The NEA warns of growing class sizes, diminishing support for underprivileged schools and significant cuts in financial aid. While the magnitude of sequestration has been downplayed, it is without question an ominous shift towards austerity. We are undermining the future innovative capacity of our country